Environmental Due Diligence and Risk Management

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Environmental Due Diligence and Risk Management

BLDI provides environmental risk identification, assessment, quantification, and mitigation services to lenders, private equity firms, purchasers, and sellers of businesses and real estate. Liability mitigation can be obtained through use of statutory protections, legal agreements, and transfers, as well as remediation of contaminated media. BLDI’s staff has extensive experience in all such manners of EDD and risk management. BLDI provides guaranteed schedules for Phase I EDD work to ensure clients’ projects will be done on time. For mergers & acquisition work, the estimation of environmental liabilities can be an unforeseen complexity. BLDI uses the latest guidance (FAS 141R) to address, identify, and quantify such liabilities.

BLDI’s EDD Services Include:

Frequently Asked Questions

In a real estate transaction how are the environmental costs shared between seller and purchaser?

The purchaser is the party that is required to complete the environmental work to be able to rely on the landowner liability protections (LLPs) available under federal and state regulation. The Phase I ESA is most often paid entirely by the purchaser. The cost sharing for Phase II ESAs ranges from 0 to 100%. In most cases the purchaser pays the entire cost of the EDD.

What is the goal of the EDD process?

Generally, the EDD process has two goals:

  • to provide environmental liability protection for a prospective purchase
  • to conduct environmental risk management (ERM) for a lender, investor or purchaser

For lenders, meeting the ERM guidance (i.e. environmental policy) is required to close the loan in compliance with policy and applicable regulatory guidance, including the recently released OCC manual (August 2013). The Phase I ESA is typically the first step in the Environmental Due Diligence (EDD) process which can include: Phase I ESA, Phase II ESA, Phase III ESA (remediation), continuing obligations/due care, and baseline environmental assessment (BEA)(Michigan-only).

For mergers & acquisition (M&A) transactions the structure of the EDD process should be structured to complement the transaction structure.

What is AAI?

All Appropriate Inquiries (AAI): the process of evaluating a property’s environmental conditions and assessing potential liability for any contamination.

What is an Environmental Transaction Screen?

An Environmental Transaction Screen (ETS) (ASTM Standard E1528) is a voluntary procedure intended to identify Potential Environmental Concerns (PECs) for commercial real estate. They are meant to be a screening tool for those who wish to conduct limited environmental due diligence (EDD), and usually only recommended for low risk property types with available historical information.

An ETS only requires a limited scope of work, which includes a site visit, review of environmental databases, completion of an environmental questionnaire by the owner or occupant and consultant doing the transaction screen, and review of limited historical sources. Historical use must be determined back to 1940 or first development using at least one of the following sources: Sanborn maps, city directories or aerial photographs.

Users who complete transaction screens do not qualify for Landowner Liability Protections (LLPs) under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). Anyone seeking these protections should complete a Phase I ESA.